External Factors Analysis
There were alarming statistics about leaded gasoline. It was said to have a lot of effects on people and society as a whole. This is as far as their health is concerned. For instance, it caused blood pressure and other health risks to adults and on the other hand, affected their body systems.
Children were also greatly affected. This can be explained from the fact that they absorb large amounts of ingested lead in their bodies. Also, children in developing countries ended up having low intelligence.
In other countries like Egypt, it caused a lot of heart attacks and in extreme cases premature deaths. As a result of this, there was a lot of international attention and pressure. Many experts started advocating for lead to be phased and in the process reduce lead poisoning.
On the other hand, it was also meant to reduce human exposure to lead. This will force the company to devise better ways of involving all stakeholders to come up with a long term solution. On the other hand, the company will continually be blamed for any health complications.
Technologically, many cars in developing countries are still using leaded gasoline. This means that they have not embraced technology well to come up with better ways of eliminating lead as an additive. As much as this is being advocated for, the demand for leaded gasoline is still high.
Also, Great Lakes did not anticipate that it will have to deal with this issue in any way because of such complexities. This can be explained from the fact that other developing countries don’t have refineries to produce unleaded gas. On the other hand, most cars don’t have catalytic converters.
Leaded gasoline has been said to have a lot of environmental effects. For instance, it has adverse effects on the quality of air. It is extremely harmful. Lead particles are inhaled in air and absorbed by the soil. As a result, environmental groups have been putting pressure on the company to stop selling leaded gasoline.
Most of these environmentalists have been arguing that the company should ban TEL by 2010. This seems to be unrealistic because developing countries can’t refine unleaded gas.
On the other hand, it has forced the company to commit itself to a lot of environmental responsibilities. There is a suggestion that the company should use profits from Octel to transit away from TEL.
The company admits that although lead additive is its greatest money maker, it is still harmful to the environment. This has forced Great Lakes to agree that the eventual elimination of leaded gas line is necessary.
Should the company stop the production of leaded gasoline, many countries will be affected. This is because most of them have not made a transition from the use of leaded gasoline to unleaded gasoline. Most governments lack regulation on the way forward as far as leaded gasoline is concerned.
This can be explained from the fact that many developing nations have not been able to eliminate lead as an additive. Any positive developments in the elimination of lead as an additive have been overshadowed by lead problems in most developing nations.
This has put the company in a tricky position as they are not certain on the way forward. Demand for leaded gasoline is still high, and the company can not just discontinue production without a clear path to follow.
Porter’s Five Forces Model
The external environment is very tricky and unpredictable in that case. This is because the lead additives industry is being blamed for many environmental problems. Environmentalists want it banned by 2010.
The industry environment, on the other hand, is very flexible as many companies are reinventing themselves to produce less harmful products.
There is no competition in the industry as most of them have switched to other products. This industry is attractive because there is a lot of demand from developing countries (Hitt et al., 2010, 8).
This industry is attractive based on good returns that Great Lakes’ has continued to get. It will continue being attractive because of the high demand for lead additives from developing countries.
These nations don’t have the necessary refineries to refine leaded gasoline. This is a very lucrative industry in the short run as later on people will move to unleaded gasoline.
For a company to survive in this industry, it needs a good strategy. This means that more attention should be paid on environmental issues and in the long run transit to unleaded gasoline as technology is moving in that direction.
The lead additives industry has the necessary assets and skills to transit and engages in more environmentally conscious activities. For instance, it is argued that it will be less costly for Great Lakes to transit from producing leaded additives.
The industry has the necessary resources to attract the best skills that will help it to come up with the best way forward.
Strategy implementation will not be a problem because there is a general good will to help the industry move forward (Hitt et al., 2010, 13). This means that all stakeholders will have to be involved in proper strategy implementation.
On the other hand, governments are committed to ensuring that they enhance the use of unleaded gasoline.
As long as developing countries don’t find a better solution to enhance their refineries, the lead additives industry will still register high returns. This is because most vehicles in those countries are still using leaded gasoline.
Competitor Analysis
Ethyl Corporation (which bought Dow chemical) is Great Lakes immediate competitor. In the early stages, the company was able to maintain its top presence in the business.
Great Lakes’ has continued to develop and produce a variety of specialty products for the market. The National lead company is also another competitor.
Although there is a lot of demand for leaded gasoline in developing countries, the company does not have any impending and invisible competitors. This is because its major competitors are no longer involved in the production of tetraethyl lead (TEL).
Tetraethyl lead is the additive for gasoline. The company has continued to flourish in all scenarios thereby controlling 90% of the market. This market has not attracted a lot of competitors because of numerous environmental issues.
Such trends are expected to continue because of large capital costs. This is in terms of building new plants and a lot of unsavory publicity.
The company faces competition from other chemical producers. To remain more competitive, it has continued to develop and produce a variety of chemicals for sustainability.
Capabilities and Challenges
The company can continue supplying lead additives to other developing countries. This is for the foreseeable future as demand is expected to remain high.
Also, competition is expected to be minimal. On the other hand, the company has the capabilities to increase its profits in the long run. This is because developing countries will only switch to unleaded gasoline when it’s economically feasible for them to do so.
Great Lakes’ is still in a better position to ensure that it adheres to good environmental practices. This is because environmental concerns have continued to be raised against the company thereby affecting its operations in a broad way.
A lot of responsibilities have been put on the company to bring about these environmental changes.
The company can still get out of lead additives production and rescue its reputation. In this case, it will be able to take a big financial hit.
On the other hand, the company can phase out its participation in the market place. This can be done with a five-year deadline. Also, it is also in a good position to push developing countries to switch to unleaded gasoline.
Reference List
Hitt, M., Ireland, D., & Hoskisson, R. (2010). Strategic Management: Concepts and Cases: Competitiveness and Globalization. USA: South Western Educational Publishing.